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Just starting out? Sharing your passion with your family? Reflecting on life’s challenges? Bring it on! This is why we invest. In this episode of Rule Breaker Investing, Motley Fool co-founder David Gardner is joined by Motley Fool analysts Maria Gallagher, Karl Thiel, and Rick Munarriz to tackle your questions and stories.
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
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This video was recorded on March 31, 2021.
David Gardner: I don’t know that we’ve had a more special month for the Rule Breaker Investing podcast than the month just ending, March 2021. The market has been, well, not the most fun thing to watch and we’re going to talk a bit about that this week. But we started the month closing out two five stock samplers, Five Stocks To Feed The Next Bear, and Five Stocks the World Needs Right Now from stocks we picked two years ago, we listened again, and more importantly, we learned. Those two samplers retired straight to the RBI Hall of Fame with gains of 120% and 347% respectively. In fact, Five Stocks The World Needs Right Now goes directly to the head of the class as the greatest sampler of all time. But then also, a week later, two Fools came in and told their stories, Emily Flippen and Rick Munarriz, shared the stock grafts of their lives in a format we will be permanently adopting in Telling Their Stories, Episode One and then 300. If you were listening two weeks ago, you know what I’m saying. If you weren’t, well, welcome to the Rule Breaker Investing podcast, you may be a new listener. You should just know that this week’s podcast, the one you’re hearing right now is the 302nd consecutive new and fresh weekly podcast since we launched in July of 2015, Cal Ripken and all that, no repeats. Two weeks ago, therefore, was No. 300 and I put some extra oomph into that one that I hope was worthy of the occasion. Then last week, the Market Cap Game Show with an all-new format. Now, as we’ve done for many, many moons, it’s the last Wednesday of the month, so we are popping open your mailbag to see and speak to you, my dear and oh so Foolish listeners. The March 2021 Mailbag, only on this week’s Rule Breaker Investing.
Welcome back to the Rule Breaker Investing podcast. I am delighted to be joined by a number of guest stars this particular week. It is, of course, your mailbag and I’m looking over the list, I think we’re going to get eight or so items this week. Anytime I have that many, I like to bring along a friend or two, so Maria Gallagher and Karl Thiel, and Rick Munarriz will be joining me later in the show. I like to start each of our mailbag typically speaking to a few hot takes from Twitter. Now, we got a lot of hot takes because it was a hot month, as I mentioned, up at the top for this podcast. Not nearly enough time to honor all the effort out there. Thank you very much. I’ll just speak to two real quick. First of all, my longtime friend, Jason Newman @jaynew4, “Special thanks and congrats to @DavidGFool, @REngdahl, and the @RBIpodcast family on an incredible accomplishment, the body of work that you’ve created for the world over 300 straight weeks has been an exercising compounding insight and timeless enjoyment, forever grateful, Fool on,” Jason closes, “I tell new investors, friends, and family all the time that if you want to learn and don’t want to read, go back to Episode One of @RBIpodcast and start there.”
Well, thank you very much, Jason, and in particular, thank you for thanking not just me, but of course, Rick, and yes, the entire Rule Breaker Investing podcast family. So many people have collaborated to make this podcast happen over 300 plus weeks and counting, and certainly, Rick Engdahl, my longtime producer from day one, deserves a huge amount of credit. But also my many guests, my many fellow Fools and that includes all of you. Anybody who’s ever taken the time to write in to the podcast, RBI@fool.com is the email address. Yeah, I’ve read it. I’ve read pretty much all of them and while I can never feature everything that we get on a given mailbag, I want you to know, I really appreciate it. It takes a village. One other tweet, this one from Jason Moore, @JimminyJilickrz, I’m not going to spell that, Jason, but I think I featured you a while ago because you were the fellow who discovered this podcast only pretty recently and you literally started at Podcast 1 and you’ve been listening your way 30 hours a week. I think you said last month or two months ago and this is what you said on Twitter this month. You said, “Oh, no. It finally happened. I finished the @RBIPodcast backdated library. Thankfully, The Motley Fool has other shows to fill out the week. If you don’t listen to this podcast, I would highly recommend it.” Well, thank you, Jason. That means a lot coming from you.
Yeah, I do want to highlight that The Motley Fool has several other wonderful podcasts. A podcast like MarketFoolery happens each day of the market week. We have recent podcasts like our Millionacres Podcast, and of course, we have long-standing podcasts like Motley Fool Answers, Motley Fool Industry Focus, and the original Motley Fool Money, which isn’t just a podcast, it’s been on various radio stations around the country for years now. So there is a lot of effort and that doesn’t even include Motley Fool Live, where so many of us make contributions in a given month. That is, of course, the TV channel, that’s how I think of it, that runs on our website and it’s for members only. If you’re a Motley Fool member, I hope you’ve discovered live.fool.com and if you haven’t yet, it’s one of my favorite developments of the last year in the investment world writ large. I think it’s an amazing contribution, very proud of it and I would highly recommend you join as a Motley Fool member so you can enjoy and learn for Motley Fool Live every day if you like.
Well, without further ado, let’s get started. Rule Breaker Investing mailbag item No. 1. This one comes from my new friend and yes, sure, you are my new friend, Adam Nelson. “Hi, David. I sincerely thank you for the recognition of my suggestion to improve the Market Cap Game Show. I always appreciate your willingness to give credit to others. You invented these fun and educational games, I simply suggested a minor tweak, yet when I see my name in the show notes and hear it over the airwaves, I can’t help but smile. Thanks for making my week and fulfilling your mission to make the world a happier place.” Well, let me pause right there and say, Adam, it’s my pleasure to do so. So much of what we do here at The Motley Fool is a collaboration between all of us and I include listeners of podcasts, members of the Fool, etc. You made a wonderful suggestion that I truly enjoyed and so many of the Twitter hot takes I did not read this week were people who had enjoyed the improvement we made to the game. Again, for anybody who is unaware that we tweaked the Market Cap Game Show, please listen to last week’s podcast, play along and see if you can beat Rick and Tim and their score of five. After all, the Market Cap Game Show was designed not for my studio contestants, but for you, listening at home so you can play along, listen, learn, and have fun. Adam Nelson, you made it more fun and smarter for a lot of us.
Now, you go on to say, “I also enjoyed your new addition to the Rule Breaker Investing podcast, the stock stories were enjoyable and thought-provoking.” I believe you’re referring here to telling their stories with Emily Flippen and Rick Munarriz. Adam, you go on to say, “After I spent a little time writing my own story and then thought about sharing it, I had a realization. It came from something that you say about stocks all the time and reiterated again in a recent episode. It’s not about where you have been, but where you are going in the future, that really matters.” To that point, Adam concludes, “I hope that every single one of your listeners can see their current high-value and future potential to hit new 52-week highs each and every year going forward.” Thanks again, Adam Nelson. Well, that’s really well said. That concept of graphing your life as a stock graph or all of those old hands here who have loved the markets and/or studied them for one or more years, we have a lot of new investors and many longtime investors.
We’re used to looking at stock graphs and seeing the line that tells us the story of how that stock has done and we always hope it starts somewhere in the lower-left and goes to the upper right. Well, we can also do the same thing with our lives and ask ourselves, if you were to graph the stock of your life, what would it look like. Just like the real market, there are some downtimes, there are some bear markets in our lives too. That opportunity to tell your story through the guys of a stock graph, I think was really fun and I’m glad that you enjoyed that and you’re not the only one, Adam, who’s started doing that for himself. I’ll be sharing a little bit more later. I do want to mention your postscript. You said, “I recently finished reading Shirzad Chamine’s book, Positive Intelligence. Again, I owe my thanks to you and your podcast for impacting me in a positive way with that recommendation.” I can’t recommend Shirzad’s work enough. Anybody who is hearing that title for the first time, Positive Intelligence, it’s a wonderful book.
Now a cliff notes version of that book for those who are not as oriented to read would be my Rule Breaker Investing podcast that featured Shirzad Chamine last year. Just google Rule Breaker Investing and Positive Intelligence and you’re going to find it. I hope it will improve your life in the same way it’s improved Adam’s and improved mine. That’s Mailbag item number 1. Let’s get back to the subject of investing with Mailbag item No. 2, this one comes from Oscar Novartis. I see it’s Dr. Oscar Novartis. Thank you for writing in, Oscar. He says, “Hey David, my name is Oscar Novartis. I’m a 33-year-old dermatologist from Puerto Rico. I started investing immediately upon graduation from residency in 2018 and quickly ran into The Motley Fool. On March 11th, 2020, that would be about a year ago, my portfolio which held about 60% of my liquidity at the time with no margin,” Oscar inserts, “Was down massively like everyone’s. I began to panic as a relatively new investor. Then your episode, which I recently relistened to about, and this is the title of it, ‘Thoughts on Our World in 10.5 Chapters‘, I was listening on my way back from work, suffering from a slight panic attack, when I heard you speak, and the way you were so cool about everything I would say was instrumental in saving me from myself and I’ve never panicked again. I just wanted to share the story. I was remembering it now about a year after it happened, ” says Oscar. “Keep up the great work. Your advice is particularly good for young inexperienced investors who are being taken to the dark side of investing AKA gambling. Cheers, Oscar Novartis.”
Oscar, thank you for writing in from Puerto Rico, I always love hearing from my international listeners. I wanted to share that one because a lot of people are feeling some panic right around now. I’ve seen a number of Fools, both on Twitter and on our discussion boards. These might be, especially newer investors seeing their stocks are down 25% or so from where they were at the start of the year. A lot of the ritzy winners from 2020 stocks that ran up three times in value, sometimes have given back a quarter of that. Now, I think if you take the view I’d take, which is to start around, I don’t know, three years ago or five years ago and see how you’re doing over the last three years, you’ll realize it’s been a pretty spectacular three or five years, especially if you’ve been a Rule Breaker investor. My biggest hope for you is that you don’t lock in too hard on how you did last month or how you did last year. I totally sympathize with anybody who may just have started investing, let’s say on January 1st of this year, and it feels like you’re 20% down as you started and that doesn’t feel good at all. But I sure do hope that you’ve been listening to me and The Motley Fool, not just for days or months, but maybe years now, and you realize it’s not about Q1 2021, just like it wasn’t about Q4 of 2020. Q1 was pretty dramatic, of 2020, when Oscar was listening to my thoughts on the World in 10.5 Chapters, which in particular was reflecting on COVID just as it was hitting in the worst way, especially for our mentalities as we realized the world was shutting down and everything was changing. That’s why I did those thoughts on Our World in 10.5 Chapters. I might go back and listen to it at some point myself because I’m curious what I was saying watching the numbers skyrocket for infections and contagion in a world that was still presumed in many ways, but it’s comforting to know in conclusion that a year later, while the stock market has had its ups and its downs, that we really have adapted pretty well as humans to try to make the best of this.
Some countries are better than others, some individuals better than others. Of course, much and many have been lost as well. We have to reflect on all of those things as we get ready for April of 2021, the second quarter whatever the market holds for us. But I really do hope we’ll remember it’s about the future, not the very recent past, which has been a weaker market, or the near past which actually has been a pretty great market. I hope we’ll realize it’s about being in the market, time in the market as the old […] goes, not timing the market. If you’re listening to me and if you’re following along with so many Fools around the world, following the advice of our company, you know that it’s about being regular, about saving every two weeks a portion of your salary, and adding that into the market and not worrying in the near term about whether the market seems high or low. Oscar, for you to say in conclusion, that you have never panicked again, that brings a big smile to my Foolish face. Thank you, Oscar Novartis, for writing in. I’m about to go to Mailbag item No. 3, but I see my friend Maria Gallagher. Maria, great to have you here on Rule Breaker Investing.
Maria Gallagher: Thanks so much for having me. I’m excited to be here.
Gardner: You bet I really enjoyed your appearance. This is Tuesday, of course, that we’re recording. We’re doing this Tuesday afternoon, March 30th, but I really enjoyed you on Motley Fool Live this morning on The Morning Show. A delight to see you again. Maria, I don’t think I’ve seen you in person for maybe more than a year now, but you’ve been doing a lot at The Motley Fool and I know you’re especially focused these days on the Discovery services. But you had a recent personal achievement that I think we should lead off with before we go to Mailbag item No. 3.
Gallagher: Absolutely. This week, I was telling David that I have run three miles without stopping. I would like to shout out the Peloton app for helping me with that. It’s been a real big win for me this quarantine.
Gardner: That is really great. Maria, I picture you as having within the last months or within the last year so moving back up to the New York City area, is that where you did your three-mile run?
Gallagher: Yes. I’m very fortunate that I live in New York, but I live near many parks, so I get to go around in parks, which makes it very nice.
Gardner: Excellent. Well, you’ve graciously consented to hang out with me for 15 minutes or so. Let’s go through a few mailbag items together. One or two of them, I definitely have you specifically in mind for, but this next one, Mailbag item No. 3, I just think is delightful. Let’s reflect together on it after I finish this wonderful REIT from Michael Rowland writing in from Reno, Nevada. Michael writes, “Hello, David. I enjoyed your new series telling their stories. I wanted to let you know, it sparked some soul-searching in this listener. I was intrigued by the concept of the stock chart of your life. But what really got me thinking was the three moments that shaped your wonderful guests as investors. Thinking about my three defining moments, I realized that I had never looked at it quite that way, and it took more brainpower than expected. Well, our first moment was not hard to identify. At 29 years old,” Michael writes, “my first foray into the market was poorly timed. I opened a brokerage account in October of 2007, and I wish that I told you everything you needed to know. Timing, however, was not my only issue. I bought high and sold low. I was easily scared out of positions.”
“When I discovered options, I found that you can understand the mechanics of something very well and yet not really understand anything.” Michael writes, “My first defining moment was a little over a year later when I threw my hands up and said to myself, ‘This is for the birds.’ While my second defining moment was much harder to suss out in 2014. Seemingly out of nowhere, I got the urge to start investing again. I resolved to take it slow and learn something along the way. I read everything I could get my hands on. One or two books even had a couple of guys wearing silly hats on the cover. I knew my “Moment” had to have something to do with this investing restart, but no particular snapshot of time seemed to have the gravity. Then I remembered something that had happened about two years earlier. My wife and I were driving through Sacramento and we stopped at a McDonald’s, likely to satisfy her craving for their ice cream cones. While standing in line, I noticed an older couple off to the side. They were probably in their early to mid-60s. I hesitate to say that they looked homeless, but the best word I can come up with to describe them is tired. They looked tired. They were huddled together with a few dollar bills and coins in their hands trying to figure out if they had the money to get what they wanted. I considered approaching them and offering help,” Michael writes, “But there were a few other people nearby. I didn’t know how such an offer would be received, and I didn’t want to embarrass them, so I did nothing, a decision I sometimes ponder. We see people in need quite often, but for some reason, this stuck with me. Driving away, I resolved that my wife and I were not going to be the retirement age couple at McDonald’s trying to figure out if we had enough money to eat. This is perhaps a selfish takeaway from an awful situation, but an honest one. After the exercise sparked by your podcast, I now believe this moment had much to do with the life-changing decision two years later to start investing the right way. While my first two moments are less than uplifting, I promise it gets better. How could it not? Yet the third moment was hardest of all to determine. Lately, I’ve had the distinct feeling that everything is coming together, like I’m really getting to know myself as an investor. But what moment to use? My portfolio value has recently hit a nice round number and surpassed it nicely on beating the market by an amount that seems to grow by the month. I’m working on some things that you can appreciate, like letting my winners win and investing in growing companies for the long term. Things are moving along nicely, but what moment?” Well, Michael concludes, “Then it hit me, there is no third defining moment. Not yet. I’m still relatively early in my wealth-building journey. My third moment is a moment in the making. I’m working toward it every day and while bumps in the road are to be expected, it’s shaping up to be a very positive one. I’m pleased to have you in every one of the Fool podcasts involved in this journey. The practical knowledge and amazing companies discussed are valuable, but the opportunity to view myself in a unique and unexpected way is priceless. For that, I thank you. Michael Rowland, Reno, Nevada.” Wow, what a pleasure that was to share. Maria, what came to mind as you heard Michael’s story?
Gallagher: I’m really impressed with just how self-aware he is and how while he was able to look back at his journey, and I really like the idea that his third moments in the making, I would think a lot of our moments are in the making and we’re looking forward for those moments and we’re hoping that they’ll be more positive moving forward. But obviously, those more negative moments have to be a part of our investing journey. I also think it’s really important that he highlighted not only his journey with investing, but his journey with money and his journey with saving, and where he wants his life to be in terms of saving. I think that that’s also a really important thing to think about in terms of where you’re investing, where you’re saving, what your priorities are moving forward. All of that being really self-aware within your monetary goals is I think an invaluable strategy and skill to have, and it sounds like he has it. I think that was a really great story and I’m really happy I got to hear it.
Gardner: Well, thank you, Maria. I really appreciate your reflections there, and yes, on the positivity. I think back to our first Mailbag item, there was Adam Nelson saying, “I hope that every single one of your listeners can see their current high-value and future potential to hit new 52-week highs each and every year going forward.” I really think it’s particularly valuable when the market is sold off as it has. Some of us have watched some of our stocks lose 25% or more of their value here in the first quarter of 2021. A lot of it does come down to not just the time frame that you have in mind, how much should a quarter count or even a year? Not just the time frame, Maria, but also your attitude toward where things are going. I think the more that we feel our portfolios with companies that strike us as shaping a better world, world-beaters and world-shapers, the better and happier we’re going to be, and I think the more reason for positivity. I know in my 300th podcasts a couple of weeks ago I celebrated Ted Lasso. Part of the reason I did is because that’s the right mentality to take to life. Have you watched any of Ted Lasso, the show, Maria?
Gallagher: It’s very high on my list. I’ve recommended it so many times.
Gardner: Excellent. Well, indeed it has won its fair share of awards here in 2021. I think I’ve already spoken to it, so I don’t think I don’t want to do a future podcast about how to invest like Ted Lasso. But I think a lot of our fellow Fools are getting it and thank you for speaking to that, Maria. Let’s go to Mailbag item No. 4, this one comes from Louis. Louis writes, “Hello, David. I hope this email finds you well. First, just want to say thank you for all that you do by enlightening the world with The Motley Fool. What an incredible company you’ve built.” I really do agree with you. I know there’s a lot of home-team thinking here. I want to make it clear, it’s my younger brother, Tom Gardner, who’s our CEO, who’s really the mind and the effort behind this company. I do think it’s becoming an incredible company. It’s my pleasure to participate and be on the boat as well as I have been for 27 years and counting. Louis goes on, Maria, he says, “I have two questions for the mailbag that I’m hoping you might be able to address on the Rule Breaker Investing podcast. Now, quick background first, I am a young investor.” Full disclosure, Maria, I think of you as a younger investor. That’s why I wanted to have you on here to react to Louis. He goes on to say, “I just started building my portfolio in late 2020. I began looking for the best resources and investing philosophies to follow. As I read many articles and opinions to various people, I noticed that I kept hearing so many great things about The Motley Fool. I began listening to many of the Fool podcasts. I must say, within a matter of months, I was completely enthralled with the amount of knowledge that I was gaining in the world of investing. I come from an educational background,” Louis writes, “in natural science. I didn’t spend much time thinking about finance and I never would’ve predicted that I would actually enjoy learning these things, so thank you.” Here comes this first question. “Now, my first question is about picking stocks. Simply put, why shouldn’t novice investors just clone the portfolio of a professional investor to gain the best possible return? For example, if I wanted a portfolio which would give me the best disruptive innovation stocks over decades, couldn’t I just Google ‘Cathie Wood stop picks’ and blindly purchase those companies? Or if I wanted a deep value reliable stock portfolio, couldn’t I just look up, ‘Warren Buffett portfolio’ and blindly purchase those companies? My thinking is no matter how much independent research I might perform, I couldn’t possibly have more knowledge in picking stocks than an experienced professional investor has. So there’s no reason that I would have greater probability for a market-beating return.” Louis concludes this point with, “While I understand it may be irresponsible to choose stocks that way, I don’t choose mine that way,” he does admit, “do you consider the logic reasonable? Do you see any merit to portfolio cloning as a style of investing?”
Gallagher: First of all, Louis, it seems like we’re in the same boat. I studied psychology undergrad, and I think when I started getting interested and invested, I was the most surprised at how interested in investing I was. To your first question, I think that looking at investors you admire for ideas is always a good idea. I’ll look at ETFs and say, “Oh, I have never heard of that company. Let me look into it on my own.” I think my biggest concern with that kind of style would be you have to understand the different capabilities that those innovation funds and those big ETFs have. So if they have $50 billion worth of assets, those movements will be affected differently than if you have your own smaller portfolio. Those impacts will disproportionately hit you if you have a smaller portfolio, and you might not be able to buy every single company within that portfolio. That would be the danger is I would be a little bit nervous about that cloning aspect. But I do think that the logic is there of saying, “I really admire and respect these people. Let me go into their portfolios. What do they own? I respect them, I trust them, let me see what their ideas are.” Then I would encourage you to do a little bit of your own research. Maybe if you’re really passionate about an ETF, buy into the ETF, you don’t have to just clone in your own portfolio, just own the ETF yourself, and then you can be a part of that $50 billion under management or whatever that number might be. But I do think I love to look at ETFs and say, “Wow, I’ve never heard of that company. Let me go do a little bit of a deeper dive on my own and understand what that company is.”
Gardner: Thank you, Maria. Louis’ second question is going to be about holding stocks which we’ll go to in a sec. All I want to do is just add a point about learning. I love that Maria was not a business or finance major, nor was I, and doesn’t sound like Louis was either. But I think each of us is a learner. I think the right approach to take to life is that, it’s a little bit of a cliche these days, but whole life learning, lifelong learning. There is such an important megatrend and tailwind behind continuing to learn as adults, and the businesses that will teach us and help us to learn. Because it turns out when you graduated and got your final degree, wherever that was, that was just the start of the rest of your life of learning, certainly was not the end. Sometimes, people think they’ve got their degree, now it’s time to do stuff and no longer learn. In that spirit then, I would simply add, Louis, that you’re not going to learn nearly as much if you’re just buying somebody else’s list. You said blindly, which I can smile at and appreciate that you included that.
Blindly buying somebody else’s list of stocks, you may or may not do well. I would question whether you can even continue to mimic what they’re doing. You may not be the first to hear when they sell for example. But really, what you’re giving way is that opportunity to learn. The more that you make your portfolio reflect your best vision for our future and people with companies whose missions you understand and believe in and you want to follow, you’re going to learn so much more than if you’re just following a hot picks list. But I also want to underline what Maria said about, “Hey, you can just buy an ETF if you want.” I think a lot of our listeners and a lot of Motley Fool members aren’t content with just mailing it in with what I’ve called sometimes the gentlemen’s sea of investing, the index fund. I think we’ve proven you can do a lot better. I know this, you’re going to be smarter, happier, and I think richer as well, if you take the time to make the effort. I love that you’ve touched off in your life, Louis, a real interest in the subject that neither you nor Maria, nor perhaps even I thought that we would have until we started getting more into it and realized its importance.
Let’s go to the second part of this question, Maria. Louis writes, “What strategies do you employ when your stock picks are not doing well, but nothing has changed with the underlying business or thesis” He says, “I’m in my 20s, so I have a very long-term mindset, but I feel that I began investing at the wrong time.” Sounds like Louis may have started just a few months ago, and it hasn’t been a pretty last few months. Returning to text here, “Some are even calling it a bubble. For example, I bought Tesla at $800, and it’s well below $650 now. I’m seeing that nearly all of my,” his phrase, “‘tech-heavy stock picks’ are well below the value where I first bought them in December, 2020.” It becomes really tempting to sell and switch to a new stock. Since you are known as a great long-term multibagger investor, I was wondering, how are you able to keep holding positions for so long even when things are down? Do you double down when the price is low? Do you partially sell some and look to wait for the right time to buy the shares back? Or do you do nothing?” Louis concludes, “I look forward to hearing some of your wisdom. Best regards.” Maria?
Gallagher: I think the really important thing that he highlighted in his second point is that nothing had changed with the underlying business fundamentals, and I think that’s something really important to know. If a company has had a terrible quarter or management changed guidance or management made a really big acquisition people don’t like, there’s a reasoning behind a difference in price. But if it is just the stock market going down and it feels indiscriminate, I think a lot of times we try to see that as an opportunity and say, “Well, if I liked it $200 more expensive, I like it at this price as well.” Then just two other quick things. The first is, I would look at the valuation of a company, so understand what the expectations are baked into that stock price. Where do investors see this company going forward? So you are aware when you buy into some of these companies say, well, it’s priced at 50 times sales. I know that that means investors are expecting a long trajectory of growth for this company for a really long period of time.
Understanding those underlying valuations will maybe help you understand a little bit why the company is going down and what you think that will look like in the future, and then my last quick point is I think, what’s always helpful for me is this idea of zooming out. In some of my classes I took during the Investor Development Program at The Motley Fool, Jim Mueller, who is a Fool here, he did a class and he showed some companies that were down 40% and said, “Would you sell at this point?” Then he zoomed out, and it was Netflix, and he just said, “Do you always want to zoom out in your mind and say, where is the company now and where do I think the company is going to be in 10 years? With my vision of the world, where will that company fit in that vision of the world? Where do you see this company moving forward?” That to me, is a really helpful way of thinking. Understanding the valuation, understanding the underlying business, having a thesis for that, and then saying, where do I think it’s going to be in the future and making your adjustments based on that.
Gardner: Wow. Thank you, Maria. That was so eloquent, and I find almost no need to add anything. I guess I’ll just say in parting to Louis and to everybody that, to hold has always struck me as so much easier than to sell and have to rebuy and it always amazes me when people are amazed that we would hold or that I would hold because it feels like I’m doing nothing, which really is the right thing to do in so many cases and it’s so much easier. Let’s move onto Mailbag item No. 6. Maria, will you stay with me one more?
Gallagher: Always.
Gardner: Awesome. Here we go. This is from Sandra. “Hi, David. I’m a relatively new listener to the Rule Breakers podcast. I found it during one of my socially distance walks during the initial shutdown in the spring of 2020 and I was hooked immediately. I appreciate your generosity in selecting five stock samplers and reporting on the results with complete transparency to your audience. I also love your view of investing too, ‘Support the world you’d like to see.’ It’s such a great message to promote and it’s refreshing to hear. I’ve personally been investing,” Sandra writes, “Since I was 10-years-old, I just turned 50, and a lot of your ideas and guidelines make great sense to me and align well with my investing philosophy too.” Now, “After listening for most of the summer, I convinced my partner,” Sandra writes, “Also, a David,” shout out to the Daves everywhere, “That we should join Stock Advisor, Rule Breakers and become Fools ourselves. I found the recommendations and the tools on fool.com very useful, I consulted regularly for new ideas in areas to invest, and as a side note, I’ve also used several of the shown videos and Fool School to educate my children on how to invest and how also to create a long-term philosophy around investing. They are now making regular small contributions,” I love reading this, “of their own money from part-time jobs into their investing accounts and selecting things they personally have an interest in, like Disney or electric cars, renewable energy, making choices based on the market trends that their Gen Z generation is causing in the marketplace and holding those companies for the long term, very exciting and gratifying to me,” Sandra writes, “Now, onto my question. Recently, one of the recommended Fool stocks that I own entered the penalty box. My question is this, has the stock ever become a multibagger or gone on to significantly beat the market after spending time in the Fool penalty box? Or is it more likely that once in the penalty box, even if it exits again, it’s likely just a limp along into the future to only underwhelming or mediocre returns? Thanks for putting on the Podcast, introducing me to the Fool-o-verse, signed, Sandra.”
I want to say one thing upfront to this, Maria, and then I have a question for you. What I want to say upfront, Sandra, is that it’s a delightful story to read and to share. I love how you got into it by walking and then you shared it with your partner, and then you’ve got your kids going in. You all are members and look how well you’re doing and I just feel like you’re doing everything right. Thank you very much for that. As to your question about the penalty box, let me briefly explain, and anybody who is the Stock Advisor or Rule Breakers member will know this. We have a penalty box in those services where we will put stocks that are present recommendations, that is, we actively like them and we tend to hold these active recommendations for years and years. But something has changed or we have questions. Maybe there was a change in management or maybe the company did something crazy that we don’t agree with and we’ll put that stock in the penalty box.
Now, a lot of people who are hockey fans and many people or not, will recognize the penalty box as a place where you’ve done something wrong out there on the ice and you have to sit in the penalty box for a little while and cool off and that’s the way we think about these stocks. We don’t want active members to actively buy those stocks, but we’re not selling them. We’re saying to the penalty box with you while we analyze things and think about it a little bit more. At the root of it, Sandra’s question before I ask my question of Maria, Sandra’s question is, have we ever had a stock that came out of the penalty box and became a huge winner? I’m going to say right up front, typically not. I would say a lot of the time, there are companies that might have had some change, at best neutral in what they’re doing and sometimes, it’s hard to pull back out of that. I would say often will go onto sell stocks that might have been in the penalty box but sometimes, they do come back out. A minority of them go onto greatness and I do want to see one. My friend Toby Bordelon, who is on this spike has the first week of the month when we reviewed some five-stock samplers, Toby pointed out Boston Beer (NYSE:SAM), ticker symbol SAM, as a great example of a stock that we put in the penalty box in 2017, in fact, history will show it was May 2nd of 2017. It was at $141, we put it in the box, we unboxed it three months later at $148 so it was up a little bit, but more recently, it’s up around $1,188. So we’re talking about a huge winner, Boston Beer. Ticker symbol, SAM. Of course, Sam Adams as an example of the code that it came out. Yeah, that can happen sometimes. I think more important, and the question I wanted to ask you, Maria, having done innumerable mailbags to this podcast, it feels like most of the time, it’s guys writing in.
I especially appreciate when I get messages for this podcast from regular listeners who are not guys, who in the case of Sandra, is a woman. I always want all of the women and all the Fools everywhere to be investing. I’m just curious, Maria. I would even say that applicants to become investment analysts at The Motley Fool […] mail, I think our numbers would show, so it always makes it more special just like champion female CEOs because I’m like, “It was hard to get to be as CEO of a public company, and probably as a woman it was even harder.” Those are usually special people. This is just a male, female question, Maria. I guess my big picture question is, why do you guys tend to write in more on this podcast?
Gallagher: The first thing is traditionally, men have more money than women due to the pay gap and due to the way finances have been structured throughout history. Generally, the breadwinner of a household would be a man. This is speaking very generally with history and statistics.
Gardner: Understood, throughout time.
Gallagher: I think that is just our baseline, is that money has always been seen as a man’s issue and something all have the man of the house take care of. As more women are getting more financial independence and as more women are getting interested in planning for retirement and getting more interested in investing, I, obviously, am very excited about that and I am one of them. I think that that’s the first barrier. Then the second barrier is the way that investing is structured, it’s a very competitive mindset as you’re saying, I want to beat the market. When you look at female investors, a lot of times, the goal isn’t always to beat the market. The goal might be, “I want to save for retirement, I want to send my kids to college.” The mindset of the female investors is quite different than the mindset of male investors. I think that’s also a barrier is if you see it as this intense competition and if you’re a woman who’s coming into money a little bit later, if you’ve recently got divorced or you’re trying to get a hold of your finances later in life, you might feel like you’re late to the party and everyone else already has all this information. It’s such a competitive spirit, it feels hard to get involved at that point in your lifetime. There’s this great book I would like to recommend called Warren Buffett Invests Like a Girl: And Why You Should, Too by Louann Lofton. It goes through a lot of the gender dynamics with money, with saving, with the way investing is presented. I think it’s a really great way to understand how investing for the long term and investing in the vision of the world you want to see is something that really resonates with a lot of female investors. We’re seeing more interest in environmental, social and governance investing, and more sustainable investing, and more investing in terms of saving for retirement and less of that intensity in competition within investing.
I think all of those trends of more financial independence combined with more interest in investing are really exciting trends that should hopefully keep being propelled further and further, but I think that that’s probably why you get more mailbag questions from guys because I think more guys are competitive, more guys are in the market, and hopefully we’ll get more and more ladies involved as well.
Gardner: Well, thank you very much for that, Maria. I agree with those things. I think about in particular, where have women traditionally been, this is looking backwards, not really that forward but, where have women appeared in the investment world. I think about investment clubs and how many all female investment clubs there have been. That just reminds me of the benefits of pooling our resources, not thinking you’re on your own and you need to be a lone wolf out there and compete against the world, which is maybe more of a masculine reflection as you were saying about how guys tend to think about. But, wow. The benefits of pulling our resources, whether it’s an investment club with men, women or all of the above, I think is a really Foolish thing in a lot of ways. Since Tom and I founded this on AOL back in the day with forums, I know the benefits of asking questions and helping answer questions. The very fact that you were with me this week on the Mailbag, answering a variety of different questions, reminds us of how much we can learn from each other and why I’m grateful that you’re part of our team here at The Motley Fool, Maria. Thank you for all of that.
Gallagher: Thank you so much, I’m so happy to be a part of the team.
Gardner: All right. Well, onto Rule Breaker mailbag item No. 6 and I see my friend Karl Thiel now. Back in the day, we used to do this in the studio, so people like Maria would come through. I’d see them physically at Fool HQ, in our studios, they bop in for a point or more for a Mailbag item and then leave. But now it’s all about Zoom and all about who just popped up on my screen. I see my friend, longtime analyst, Karl Thiel. Karl, you helped us review some samplers earlier this month. It’s great to have you back on Rule Breaker Investing.
Karl Thiel: It’s good to be here.
Gardner: Now, Karl, I’d ask Maria to share something recently about her life as an introduction earlier, she mentioned she has just run three miles continuously without stopping for perhaps the first time in a, let’s just say, a long time. Karl, do you have anything you’d like to talk about as regards specifically running?
Thiel: Yeah, I heard that. I have to reflect that I think a little over 10 years ago, I ran half a marathon.
Gardner: Wow.
Thiel: Because I was quite into running at that time. I was thinking I was maybe even going to go for a full marathon. That is the problem with goals, I set this goal of running half a marathon, and then once I did it without meaning to, I stopped running shortly thereafter. [laughs] I’m not sure I’d make it a mile now.
Gardner: It’s all about what comes next, Karl, not what was. Karl, there’s a chance. Let’s not veer at running anyway, just good health and self-awareness around your health. I know it’s going to be part of your future.
Thiel: Absolutely.
Gardner: All right, let’s go in the mailbag item number is 6. “Hi, I’m a long-time listener in Sweden.” writes Frederick […] . I hope I did a decent job not butchering your last name Frederick. “But perhaps you go on disappointingly actually not a Rule Breaker member any longer. No, please, don’t press the delete button just yet.” with a smiley emoji. Frederick writes. “We just switched the Rule Breaker membership and our Rule Breaker portfolio responsibility within the family. It is now my wife, Maria, who is the Chief Fool of the family. Loving this. it’s great, I can even get away with calling her Chief Fool without ending up on the sofa. Her personality simply fits much better for the volatility expected from Rule Breakers, and that type of investing. She eagerly looks forward to all of your buy recommendations and Best Buys Now, many of which she acts on since we are still in the portfolio build-up phase.” I think we’ve taken up enough of your time, Maria, so I think I should say goodbye to you, but I wanted you to be able to live on that note because I kind of love that.
Gallagher: I love her name. [laughs] I’m not surprised that one of the happy […] , is the one who is an example of gender reversal within investing. I’m excited to see it and I hope we have more Chief Fool Maria’s in the future.
Gardner: Love it and thank you very much Maria Gallagher for being with us this week.
Gallagher: Thanks so much for having me.
Gardner: All right. Then there’s a shift here Karl in Frederick’s focus. This is why I wanted to have you on for this moment. Frederick goes on to say, “Anyway. Now, for the topic, we came across a Canadian company called AbCellera Biologics (NASDAQ:ABCL) that recently IPOed. We tried to research it on fool.com and other places on our own, but failed. I was thinking that it looks like a possible candidate for a Rule Breaker analysis with what seems to be a novel approach in biotech and a leadership that has a lot of skin in the game, they also attracted,” speaking of Thiel’s, “They also attracted Peter Thiel to the board with a smaller stake in the company.” Frederick writes. “Sounds interesting. Hope that you might have a look at it in case you think AbCellera might be worth a piece of Rule Breaker‘s capital. Thanks and stay safe with kind regards, Frederick.” and will also say, it’s great to have Frederick and Maria in the Fool here. Well, Karl, a number of things going on. Since you are one of my favorite biotech analysts, I absolutely wanted to have you on. Now, I’m pretty sure you heard at this company as of yesterday, but when I dropped you a note earlier today, you said you’d look into it a little bit. We have to speak about that No. 1. Are you in any relation to Peter Thiel because you both spell your last name the same way?
Thiel: I am sure we are in some distant way, [laughs] aren’t we all? I hope that when he goes to redo his will, he remembers that. [laughs] No, I’m not aware that we are related in any way.
Gardner: Very well said. Well, so Karl, let’s talk briefly about biotech here. Now, to the extent you may have dug up anything on AbCellera. I think it will be nice to answer that question for Frederick. But for most of us, we don’t even know anything about this company. So I hope part of what you could speak to more generally is what you do when you hear about a new stock, maybe a biotech stock, how you start to learn about it. A couple of the things you might look at suggest for all of us.
Thiel: Yeah, what’s really interesting, I’m going to make up this number, but I’ll just say if you go look at the last two years of IPOs, I am going to say 65% of them are healthcare biotech companies.
Gardner: Wow, I had no idea. I think of all of them as SPACs and just doing anything they want these days. But I’m sure you’re right.
Thiel: Yeah, more of that recently. But it’s an amazing number. So when you said that, it’s like, yeah, “This is just one more thing in my inbox. I really should have looked at some of these companies more.” They only came public I think in December of 2020.
Gardner: Okay.
Thiel: It’s a pretty recent IPO. Actually, a super cool company. I really should have looked into it [laughs]. It’s really interesting. I kind of like to go into technology first on these things. I think it’s a little hard to resist doing what it was like? What’s it like? It’s like this, it’s like that. Kind of compare the stuff I know and then figure out how it’s different. Or at least that’s how I approach this company. Because what they do is antibody discovery and antibody engineering. That’s not unique, and in fact, the company that most comes to mind to being similar to that would be an Aptus Bio, which is going to get David to hang up on me. Probably if not.
Gardner: It’s not one of our best Rule Breaker performances. I’m the one who picked though, Karl.
Thiel: [laughs] Well, that’s kind of you to take the blame. Yeah, it’s not been a great company. Not that what they do isn’t important. What I like about this is, it can get very exciting to chase new technologies, gene therapy and CRISPR and all kinds of new ways to approach problems.
Gardner: I got you.
Thiel: But monoclonal antibodies, that was a $140 billion in sales of monoclonal antibodies in 2019 and it’s just going up. It’s such a big market, so it really makes sense to be involved in this. What fascinates me about this, is just their approach to it. They have no pipeline. They’re not trying to create drugs. They are only doing the discovery and kind of initial engineering for partners. So one of the things I like to look for, one of the things that kind of helps me, especially if you have an area like this where a lot of people are involved in monoclonal antibodies and trying to come up with new drugs, they make a lot of claims about their science and they have a proprietary this, et cetera. What kind of claims are they making that is some way validated. What’s really fascinating about them, in 2018, they had revenue of $8 million and they were profitable. In 2019, they had revenue of $11 million and they were pretty much break even.
Gardner: Still so early so development stage, yeah?
Thiel: Right and in 2020 they had revenue of $223 million.
Gardner: Incredible.
Thiel: Turned a profit. So the big part of that is that they are responsible for a molecule that’s used in treating COVID. It’s the wham, bam one. It’s […]. Eli Lilly (NYSE: LLY) has two antibodies that are used to treat COVID infection and this is one of them.
Gardner: Okay.
Thiel: It was the first one, they are very very rapid. This is their technology. They start with screening cells to find natural antibodies and basically are able to use a lot of computational techniques to hone down on good candidates and then engineer them and split them out. What I think makes them really interesting, but it’s also the question I would have going forward about them is, just how much value they were providing. I was floored that they had $223 million in revenue from basically this one program. Right? When you think about this kind of company, I would say that they would be working for kind of 10% royalties maybe. Maybe less, maybe something that scaled a little bit higher at high salt levels. Not something that would produce that kind of revenue. But what they actually did is, they did a really high-risk partnership with Lilly where they basically decided to shoulder half of the development. So they are getting a lot of upside from it. My question going forward with them is just how much of an outlier is that?
Gardner: Okay.
Thiel: That was a gutsy move to make.
Gardner: Well, thank you very much for that breakdown and also thank you to Frederick and Maria for their research. It’s not surprising to me that they had a hard time finding information about the company because as you just mentioned, Karl, it’s a recent IPO. It’s also on a Canadian exchange. It is a $6 billion market cap so still a smaller cap company, but by no means a microcap here. We’re talking about a fairly substantial enterprise, all though still so early on and higher-risk, no question about that. I think more generally, I would just say that I think it’s so cool. All that’s happening across all of healthcare. I’ve called this sometimes the age of miracles because we’re starting to figure out how to do stuff humans never knew how to do before, including healing some things we never knew how to heal or treat.
Well, think about vaccines for COVID showing up within 12 months or so of a worldwide pandemic. Those are remarkable and we want to be invested in those things. I have nothing really to say about AbCellera. I don’t even know if I’m pronouncing the name right. But Frederick, I hope you enjoyed Karl’s take in feels if we’ve given you some direction to look further, I do think that reading on companies own websites these days is not a bad way to do research. When I first came out of college 30 years ago or so, you had the basic call for the annual report. You would call investor relations. You’d have to get the phone number and they would get your mailing address and they would mail you their latest 10-K or annual report. Which sometimes might be dated by as much as nine or 12 months. Boy we’re in a different place today to learn and piece things together using the Internet. I think that’s what I would probably do with a company like this one. Well, Karl, will you hang with me for one more item?
Thiel: Absolutely.
Gardner: All right. Rule Breaker mailbag, Item No. 7. This comes from PT […] . Pretty sure PT has written this show before. “Great to talk again to Dr. […] of the RBI team,” PT writes. “Thank you for the persisted excellence in everything you do. I always look forward to Wednesdays so I can soak up the latest bits of wisdom from you guys. As a physician with a finance degree that’s a deadly combination, deadly in a good way, I attempt to educate my colleagues, residents, and medical students about personal finance and investing,” he writes “within the rules of the SEC, of course.” Well, that’s really wonderful. What a great resource you are, I’m sure to those around you. Karl, you have to admire the combo of the physician with the finance degree. Do you know any other such people yourself?
Thiel: Yeah. They’re mostly on Wall Street.
Gardner: [laughs] Yeah. Good point. Sounds like PT remains somewhere there in the hospital or the medical facility, but that’s just great. Let’s pick it up there. “Your discussion about bitcoin,” that was last month, “was tremendous, touched on all the components that we need to understand to make an educated decision on whether it is a suitable investment. I particularly enjoyed the insight that bitcoin isn’t necessarily ‘investment’, but rather ‘store of wealth’. This analogy, which I promptly stole, with proper sourcing has opened the eyes to so many colleagues.” That’s just great to hear. “Lastly, there are so many questions about how we went to add to, or sell a position in one’s investment portfolio that I hear on Rule Breaker Investing and other Fool podcasts.” He’s going to go on to share insight here, Karl, I’d just love to hear your take before we move to No. 8. He writes, “I particularly enjoyed the XIRR function in Excel to help examine the outperformance of a stock compared to the market, the market’s XIRR.” XIRR, again, we’re not going to get into the profundities of Excel here on this mailbag item, but certainly a lot of analysts at The Fool would like to use that as a way to gauge the compounded return of a stock or of the market. Those functions are in Excel, but really, I’m mainly reading this to get to his insight. He says, “XIRR allows me to take into account the size and a regular timing of cash flows to my stock or ETF positions. Then I take this outperformance or underperformance and I divide it by the size of the position in my portfolio.”
So let’s pause there. I’ve hit my listeners with some heavy math, Karl, but I believe what he is saying is if you think about a numerator and a denominator, if the numerator is just how well a stock is performing, it’s XIRR, how good is that annualized return. Then the denominator is the size of that position in his portfolio. So a high number, Karl, would be what?
Thiel: That would mean you had a small denominator, which would mean that your position is not big, too small.
Gardner: Too small and if it’s a big number of the numerator, we’re talking about a stock that’s doing really well and that gets to the heart of what Dr. […] is suggesting here. He says, “The higher the number, the more likely that I am,” or he thinks, “I should add to that position the next time I add money into my investing account. This math also helps me with my sleep number. Even if a stock grows tremendously to an outweighed position in my portfolio, I can examine how much outperformance it’s making compared to the market. I might even add to the position, if I know it’s a winner, we, Fools, let them keep winning.” We’ll just conclude it right there. But I included this this week for a couple of reasons.
First, this is a little bit more one-on-one. We’re getting into the math of things, not the best for a general audience, but a lot of our listeners are more serious investors or math people. Karl, I think it’s cool that Dr. […] has basically identified a ratio he uses to decide when to add to a position. Because he’s saying if winners keep winning and generally over time they will, and you have a small position in it, then it’s the thing where you could sort a spreadsheet, buy a portfolio, you can have a column that shows this ratio and you could be reminded, oh, I don’t have enough of that thing and it’s doing really well. My question to you before you go, Karl, is, do you see any weaknesses to this and/or do you practice this in your own portfolio?
Thiel: This is funny. We did a podcast earlier today and I was a little bit bemoaning my lack of discipline and some of that. I think some of these mechanical areas of discipline can be really, really helpful for that sort of thing. I’m not above worrying about my own psychology with this. What I like about that is that it really helps you focus on the whole idea of adding to your winners. Because you’re mechanically adding to your winners, you’re lining that up in a way that’s different than just looking at a huge return and thinking maybe you’ve missed the boat on that.
Gardner: I think in particular, Karl, I could imagine this being suitable for people with larger portfolios, a lot of positions sometimes if you have, I mean, I have about 55 stocks in my family of portfolios, when you have dozens of positions, it starts becoming helpful to have a tool that lets you sort a spreadsheet with rows with lots of different positions to help you make allocation decisions. Sometimes now I will admit I’m not really a mechanical investor. I don’t use quantitative metrics to drive my decision-making. I’d far rather say, which company do I really like right now, because I like its future and it seems underpriced relative to that. But I certainly can understand how it can be a benefit for people, especially with larger numbers of positions to have ratios like this. Karl, are you a mechanical investor in any way, shape, or form?
Thiel: I’m not, but I’m starting to conclude that the universe is trying to tell me something today. [laughs] It’s come up a few times. [laughs] I think I need a little more discipline.
Gardner: Karl, and by the way, fingers crossed, Peter Thiel is listening and is riding you into the wills and estates plan for the greater Thiel family. The Thiel family writ large in the sky.
Thiel: Come on, Uncle Pete.
Gardner: [laughs] I have a habit of trying to save the best for last for each week’s podcast, particularly the mailbags and I think we’re about to hit it here with mailbag item No. 8 from Lowe Grant. But first, I want to welcome you back. I’m going to call him a special guest once again, Rick Munarriz, welcome.
Rick Munarriz: Thank you, David. I’ve been here a lot lately, it seems. I think I should bring you the punch card, like an RBI punch card where I get a free sandwich in my fourth podcast that I [laughs] squeeze another one in before the end of the month.
Gardner: That’s why I wanted to introduce you as my special guest because it’s rare that one person will appear on three different podcasts for this podcast inside a month, and yes here you are, Rick. It was a delight again to have you tell your story earlier this month. Then you appeared on the Market Cap Game Show. I want to ask you about that in a second. Now, here you are back because we got a great mailbag item that I know you can speak to, and I would love that. You are my special guest star to close this week, but let me first mention that you played the Market Cap Game Show last week and we had a lot of people riding in, and I particularly enjoyed this note from Jean Paul Benoit and that’s @JeanpaulBenoit7 on Twitter. But he wrote in a side note, “I love how the analysts are clearly,” he writes, “incredible investors,” which is a high complement, “and yet can be so, so wrong, sometimes [laughs] with confidence for the Market Cap Game Show.” He writes, “Faced with tears of joy,” I don’t know if that’s a phrase or the emoji [laughs] description, “adds a special bit of humor and humility to the game and seems to inspire a bit more conversation around the stock. I dig the new format.” Well, thank you again for that, Jean Paul. Part of the reason that I never actually want to play the Market Cap Game Show, I just like lumping Alex Trebek, the host, Rick, is, so that I don’t ever look silly as all of us are going through when we’re guessing market caps without knowing ahead of time what company we’re talking about. Rick, you’re one of our longest any analysts, The Fool, that was your first Market Cap Game Show. Any reflections?
Munarriz: I want to clear up, I was not going in confident at all. I did not play the Aaron card who memorized all the market caps going in. [laughs] I went intentionally uninformed without checking everything. [laughs] Market cap is just as one big blind spot that’s just always there for me. I always have a feel where I think the market is going to feel that the company is more valuable or less valuable in the future. I have that good feeling, but if you tell me what the steps are on the scale right now, I would be terrible at the carnival, guessing someone’s weight. I would just be awful. [laughs] Can I give a spoiler here about the game tonight? It was already old. Yeah, I’m surprised that it was basically split five to five with Tim, who definitely gave far tighter ranges, clearly had a better knowledge of it. I guess I just played it differently and was able to win half of those rounds.
Gardner: I will mention that John Paul himself said he scored six. I mentioned this earlier in the show. This Game Show, while it is certainly for my guest star contestants, it is for all of us, especially those playing at home. We want you to outscore. John Paul, well done scoring a six. You yourself, sir, were not bragging about that. You were responding to my own question of how you did. But it’s fun, we’re going to keep doing it at least four times a year because I always look forward to it at the end of every quarter. Well, at the end of every month, we do a mailbag and we get notes from people reflecting back on the month that was for Rule Breaker Investing. Boy, did I enjoy this one from Lyle Grant? Rick, I want to share this with you now. This is actually signed, Ellie’s dad. Here we go.
Rule Breaker mailbag item No. 8, “Dear David, I always enjoy your podcast, but Telling Their Stories, Volume One, was especially impactful to me. The idea of describing your life like a stock graph makes one reflect on where we come from and the forces that shaped our lives. I was driving while listening to the podcast and had to pull over when Rick started talking about his son. If you were to substitute the name Kevin for Ellie, he would’ve been telling my daughter’s story. She too had a rare brain tumor in utero, and received radiation treatment and an experimental drug therapy, which saved her life, but had lasting impacts to her brain. Ellie is now a happy, healthy, young woman with a great sense of humor who we will be caring for the rest of our days. Cancer treatment is not only emotionally draining on a family, but also financially draining even with insurance. For years, any extra funds we had went to pay for therapies, equipment, and copays. Saving and investing seemed like a distant dream. However, once my daughter’s health stabilized, we could finally take a breath and start to plan for the future. Like Rick, we realized that we needed to not only save enough for our own retirement, but also pass on enough for Ellie to live out her life and not leave that financial obligation to our son.
This motivated me to educate myself about investing,” Lyle writes. “At that time, we had a small retirement account we entrusted to an investment company, and were making more money on us than we were making in the market. We knew we had to find a better path. The Motley Fool provided a road map to get there. In a bit of dumb luck, I called our financial advisor in early 2008 and asked them to sell all the mutual funds in our account. Over the next year, I opened up IRAs and a brokerage account. Transferred the funds out of the advisors hands and researched stocks. I started by buying Apple and Google in May of 2009 and quickly expanded the portfolio to 20 stocks. Little did I understand at the time that my timing could not have been better. I’ve made my share of mistakes over the years, but investing has gone from something I needed to do to fund our future to something I’m passionate about. Once my son was about 10, we started investing together. He built his own portfolio of mostly Rule Breaker selections. He is now a freshman at Gonzaga University. Go Bulldogs,” writes Lyle, “and his portfolio has grown large enough to help fund part of his education. We still have a way to go to fully fund our future, but these last 12 years have made that dream achievable. I appreciate and share your optimism about the future. For my part, I will continue to invest in the Rule Breakers who are working to make a healthier, happier world.” Signed, “Ellie’s dad.”
Munarriz: Wow.
Gardner: Wow, is right. Rick, one of the things I love about the Internet is before the Internet, we thought we were isolated. We thought we were the only ones who had our situation. Certainly, every context is different and everything is ultimately unique, but to be able to be connected with somebody, who having heard your story, feels such kinship, and for me as a third-party observer to see that kind of connection, gives me chills. It makes me think about how wonderful it is, that whether it’s Fool.com, or the Real Breaker Investing podcast, or the Internet writ large, that we can make those connections. That is very special.
Munarriz: Yeah, indeed. When you hear that, obviously, it hits you, but I lived it too. So when you find someone who basically lived the same thing that you did. I know it’s something, I think I sprained it on you earlier. I’m pretty sure you’ve never heard this story because it’s not a story I tell.
Gardner: I have not.
Munarriz: Yeah. It’s a Ted talk, it’s not a conversation piece. Obviously, I’m not ashamed or hiding it, it’s just something that doesn’t define me necessarily. We’re just talking about stocks, talking about life. I was just referring to my special needs son, and leave it at that, because it just winds up being such a big story. But there’s so many parallels in these stories. Just hearing that from Ellie’s dad, from Lyle, yeah, it’s right there with you. It’s such a challenging part in your life. You look back, it was in my case, I feel like it was someone else that lived through that, lived through the pediatric cancer ward and all that stuff that no one should ever have to live through. But it’s amazing to see that a story that I was just telling you connected that way. Obviously, the letter connects to me right back.
Gardner: Well, that was a very special letter, and that was a very special podcast, Rick. I want to thank you and Emily again for being the pioneers of that new series. We’re definitely going to continue that series with more of our favorite Fool personalities. But I think about your story, Rick, I think about Ellie’s dad’s story, and I think this is why we invest, isn’t it? I mean, a lot of us are thinking first and foremost and rightly so about retirement, whatever that might mean, whatever that word means to us. But when other circumstances pop-up in life, all of a sudden we realize, you know what? We’re investing for something more than just that. It takes on greater meaning. My golly, am I ever grateful for the, what I’ll call the miracle of the stock market, that we could all work together to create great businesses. We could co-invest with each other, we could prosper overtime, and end up solving problems we encounter in life through the stock market. This is why we invest.
Munarriz: Yeah, absolutely. In my case, mine happened a few years before Lyle’s situation. I was just looking back at the timeline, and this was basically, he was born in 1998, and 1999 is when he was diagnosed, and it was two years of treatment. This is the dotcom bubble between 1999 and 2001. I always have this foggy recollection of the dotcom bubble, even though we lived it, obviously The Motley Fool had front row seats to the show. But I think it was just because there was just so much life drama and stuff happening all around me that it was just almost a blur. But it’s just amazing how things happened, but it’s also important why we have to invest, because life throws you these curves. For Kevin’s dad and for Ellie’s dad, these things happen. Sometimes, what you think is your path in the future gets a little more complicated, and it gets a lot easier if you invest correctly.
Gardner: Wow. Well said. To close with a sports note, I think it was Vince Lombardi who said, “It’s not whether you get knocked down, it’s whether you got back up.” That is so true of life. Indeed, I think one of America’s five core values is resilience. I think that we’re incredibly resilient as a nation. I know so many of my fellow Fools are examples of resilience in their own lives. Well, thank you very much, Rick Munarriz. Thank you very much, Lyle Grant. Sure, a March Madness note to close, boy, I’m an even bigger Gonzaga Bulldogs fan after that note. I will say we are recording Tuesday afternoon, so I don’t know whether Gonzaga won tonight and advanced to the final four in the men’s college basketball, NCAA Tournament, but I sure hope they did. I’m cheering them on to victory, along with the entire Grant family as well.
Well, thank you again to my guests; Maria Gallagher, Karl Thiel, and Rick Munarriz. Thank you as always to my producer Rick Engdahl, and to my friend Heather Horton for associate producing this week’s show. I am looking forward to April. To all of you, we say Fool on!
David Gardner owns shares of Apple, Netflix, and Walt Disney. Karl Thiel owns shares of Apple. Maria Gallagher owns shares of Walt Disney. Rick Munarriz owns shares of Apple, Netflix, Peloton Interactive, and Walt Disney. The Motley Fool owns shares of and recommends Apple, Boston Beer, Netflix, Peloton Interactive, and Walt Disney. The Motley Fool recommends the following options: long March 2023 $120.0 calls on Apple and short March 2023 $130.0 calls on Apple. The Motley Fool has a disclosure policy.
